September 2012, Vol. 67 No. 9
Washington Watch
Tighter EPA Soot Standard Could Complicate Underground Construction
Companies who do underground construction will be affected — and not in a good way — if the Environmental Protection Agency (EPA) goes ahead with its proposal to tighten its particulate matter air emissions standard, referred to as the PM2.5 standard (2.5 indicates the size of the particle).
The EPA’s proposed rule issued in mid-June would strengthen the annual health standard for PM2.5 to a level within a range of 13 micrograms per cubic meter to 12 micrograms per cubic meter. The current standard is 15 micrograms per cubic meter. Particle pollution is made up of a number of components, including acids (such as nitrates and sulfates), organic chemicals, metals, and soil or dust particles. It is sometimes referred to as the “soot” standard. The EPA says 99 percent of the counties in the U.S. will meet the new standard without having to do anything. But a number of trade associations aren’t buying that.
“EPA is proposing to lower PM2.5 standards to near natural background levels in some counties and within many forecasting models’ conservative margins of error,” says Joel Drexel, secretary, Sanco Pipelines Inc. “This will make it difficult for businesses such as ours to comply with EPA’s PSD permitting program.”
PSD stands for Prevention of Significant Deterioration. It is one of the Clean Air Act regulatory programs which requires diggers to get permits when their construction activities create more than a threshold level of objectionable air emissions. Activities which create too much PM2.5 pollution may require obtaining a PSD permit, which can limit the way underground construction is done, and impose reporting and recordkeeping requirements on a company.
Sanco performs heavy underground construction installation of pipelines for residential, commercial and public works projects in the greater Bay Area of California. It employs approximately 150 employees.
DOE announces new Natural Gas Vehicle Program
The Department of Energy announced a new $30 million research program designed to develop technology for light-weight, affordable natural gas tanks for vehicles and natural gas compressors that can efficiently fuel a natural gas vehicle at home. Called Methane Opportunities for Vehicular Energy (MOVE), the announcement in July preceded Senate hearings on natural gas vehicles and issuance of an important report from the National Petroleum Council’s Study on Future Transportation Fuels.
That report covered a wide range of alternative fuels, and noted: “There is an opportunity for light and heavy duty natural gas vehicles to become attractive to both retail and fleet consumers.”
A number of the witnesses at July 24 Senate hearings mentioned the DOE initiative. The very high cost of home natural gas refueling systems — upwards of $5,000 — is a significant roadblock to the establishment of a natural gas automobile industry. Electric vehicles such as the Chevy Volt don’t suffer from the same barrier since fueling there involves simply plugging the car into a garage electrical outlet.
Reg Modlin, director of Regulatory Affairs at Chrysler Groups LLC, agrees that the current cost of a home natural gas refueling “station” can approach $5,000. “That is a bit of a barrier,” he said, with some understatement, considering a natural gas car, if anyone made one, would also sell at a premium, as is the case with the Volt. The industry, he explained, is working on its own to bring down the cost of a home refueling system to one-third of the cost. He added that the DOE MOVE program, one of whose objectives is to bring the cost of home refueling to $500, “is fantastic.”
Michael Gallagher, senior advisor at Westport Innovations Inc., mentioned that two of the 13 projects announced by the DOE focus on home refueling, including one led by General Electric. “So with some serious players involved, natural gas vehicles could have a very nice future,” he added. Gallagher was chairman of the Natural Gas Group of the National Petroleum Council’s Study on Future Transportation Fuels.
Honda made a Civic natural gas-fueled vehicle but the cost of the compressor hiked the cost of the refueling station to the $5,000-plus level. Honda discontinued the car in the face of negligible consumer demand. Chrysler is now selling its CNG Ram truck which is built as a bi-fuel vehicle with CNG tanks holding up to an equivalent of 18.2 gallons of gasoline and an eight-gallon reserve gasoline tank. The vehicle’s range on CNG is 255 miles and the total range of the vehicle including gas reserve is 367 miles.
Major fleet operators like Waste Management, Verizon, Ryder and others are switching to natural gas vehicles because the business case is there.
Witnesses at the hearings pressed for two specific federal initiatives. Dave McCurdy, president and CEO, American Gas Association, argued for “equalization” of natural gas vehicles with electric vehicles in the Obama administration’s 2017-2025 final rule on corporate average fuel economy (CAFE) standards. That final rule is on the cusp of being published, with the White House Office of Management and Budget reviewing it. McCurdy said the latest version does not include equalization. He encouraged members of the committee to press the White House to reverse that failure.
The other change almost all the witnesses advocated for was elimination of the differential in gas excise tax for liquid natural gas versus diesel fuel. Currently, the effective excise tax for LNG is $0.41 per diesel gallon equivalent versus $0.243 for diesel fuel. This is because LNG has a lower energy density per gallon than diesel, but the tax is applied on a volume (gallon) basis rather than an energy equivalent basis. This discrepancy has been corrected for CNG, but not for LNG, and provides an unfair disincentive to the sale of LNG. McCurdy said this could be corrected in the “tax extenders” bill Congress is expected to pass after the November election. The bill would renew certain tax incentives which have expired.
New business standards for interstates
The Federal Energy Regulatory Commission has been focusing on assuring better integration of natural gas supply with natural gas-fueled electric utilities, and issuance of new business practice standards for pipelines is another step in that direction. The standards were issued in July, and go into effect on Dec. 1, 2012. They are based on Wholesale Gas Quadrant standards adopted by the North American Energy Standards Board (NAESB).
The Version 2.0 Standards revised the Version 1.9 standards to include: (1) standards to support gas-electric interdependency; (2) standards created for Capacity Release redesign due to the elimination of Electronic Data Interchange (EDI) for Capacity Release Upload information; (3) standards to support the Electronic Delivery Mechanism (EDM); (4) standards to support the Customer Security Administration (CSA) Process; (5) standards for pipeline postings of information regarding waste heat; and (6) minor technical maintenance revisions designed to more efficiently process wholesale natural gas transactions.
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